Score Card Shows 1958's Was Shortest

HOW does the 1957-58 recession compare with the two other postwar business dips of 1948-49 and 1953-54? Last week the nonpolitical Committee for Economic Development brought out a remarkable set of graphs that for the first time put the recent downturn in clear focus--and incidentally laid to rest some cherished views about combatting recessions. Starting at the first real dips, C.E.D. individually plotted such prime indicators as industrial production, gross national product, employment, inventory changes, plant expansion, month by month or quarter by quarter to show the relationship of each to the others. Conclusion: the current recession is the shortest and probably the mildest of the three. It is also the recession that proved it a fallacy to consider tax cuts and heavy Government public works pump-priming, either together or separately, as the speediest and surest cure for any business lag.

Overall, the recession hit bottom in April 1958 in the jig time of nine months--two months faster than the 1949 recession and a full four months sooner than in 1954. At times, particularly during February and March, the current slide was sharper than in the other two recessions. But so was the upturn. Gross national product has apparently turned around after dropping for two quarters, v. a year of backing and filling in 1949 and a year of decline in the 1954 business downturn. Industrial production recovered in eight months, v. eleven months and twelve months before any steady rise took place in the other two post war recessions; the percentage of workers unemployed turned down after eight months, faster than before.

The C.E.D. charts seem to be more proof of the correctness of the Administration's course in opposing loud congressional demands, and some by businessmen, for heavy tax cuts and a vast program of Government spending. According to C.E.D.'s graphs, neither course would necessarily have accelerated the recovery. Despite 1954's tax cut, personal income took 14 months to regain and hold lost ground. This time personal income is almost back to pre-recession levels in ten months, without any reduction in taxes. At the start of the 1949 recession, Government spending was sharply increased, yet employment showed no improvement for eight months. Without such help this time, the strong upturn came in eight months. According to Keynesian theories of countercyclical government pump-priming, 1949's recovery should have come considerably faster than it did, while 1958's should be much slower.

Where does the U.S. economy go from here? On C.E.D.'s charts a major booster out of the 1949 and 1954 recessions was the turnabout in inventories. In the 1949 recession businessmen continued to liquidate inventories for more than a year, in 1953-54 for 15 months, before any sizeable upturn took place. This time the rate of inventory liquidation seems to be bottoming out after two quarters, though no one is willing to predict any heavy accumulation in the near future. Business outlays for new plant and equipment are a more worrisome problem. The 1958 slide in expansion expenditures has already gone on for three quarters and may continue for possibly another year, thus holding the general economy down.

What might accelerate the recovery, regardless of what happens to inventories and plant expansion, is housing, which C.E.D.'s chartists call the economy's "ace in the hole." After dropping farther than in either of the two preceding recessions (13% v. 2 1/2% in 1953, 3 1/2% in 1948), the annual rate of new housing starts broke through pre-recession levels in June, and the industry is expected to pump $1 billion into the market for men and materials this year.

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